Zuckerberg, banks must face IPO lawsuit

A federal judge said Facebook chief executive Mark Zuckerberg and dozens of banks must face a lawsuit, accusing the social media company of misleading investors about its financial health before its $US16 billion initial public offering last year.

In a decision made public on Wednesday, US District Judge Robert Sweet in Manhattan said investors could pursue claims that Facebook concealed material information from its IPO registration statement.

Investors alleged that Facebook should have disclosed its internal projections on how increased mobile usage and product decisions might reduce future revenues, among other things.

The defendants argued that Facebook had no obligation to make the disclosures, which they called immaterial, even though it had provided such projections to its underwriters' analysts.

In an 83-page decision dated December 11, Judge Sweet said higher mobile usage had already had a "material negative" impact on revenue, and that the company should have disclosed more about the relationship.

"The company's purported risk warnings misleadingly represented that this revenue cut was merely possible when, in fact, it had already materialised," Judge Sweet wrote. "Plaintiffs have sufficiently pleaded material misrepresentation(s) that could have and did mislead investors regarding the company's future and current revenues."

A spokeswoman for Facebook had no immediate comment. A lawyer for some of the investors did not immediately respond to requests for comment.

On Monday, Judge Sweet issued a decision that investors could also pursue claims, accusing Nasdaq OMX Group of concealing technology problems that led to difficulties in processing trades on May 18, 2012, Facebook's first day of trading.